Ares ARES Business Risk Report

A. Fluctuations in interest rates: Ares Management, being a significant player in the investment management sector, is susceptible to risks associated with interest rate fluctuations. These fluctuations can impact borrowing costs and affect the valuation of financial instruments the company holds.

B. Volatility in market prices: Market volatility can directly affect the performance of Ares Management’s investment portfolios, influencing both asset values and investment income. Such volatility often reflects broader economic conditions and can result in substantial financial impacts.

C. Foreign exchange rate fluctuations: With global operations, Ares Management faces risks stemming from movements in foreign exchange rates. These changes can affect the repatriation of earnings from overseas and alter the cost structures of international operations.

A. Supply chain disruptions: Although Ares primarily operates in the financial sector and is less affected by traditional supply chain issues, disruptions in the global financial services infrastructure could impact operational capabilities.

B. Technological failures: Ares Management relies heavily on information technology systems to conduct trading, manage portfolios, and maintain secure communications. Failures or breaches in these systems could significantly disrupt operations.

C. Regulatory compliance challenges: As a financial institution, Ares is subject to extensive regulation. Changes in laws or regulations—or failures to comply with existing ones—could lead to sanctions, fines, or damage to reputation.

A. Increased competition: The investment management industry is highly competitive. Ares Management must continually adapt and innovate to maintain its competitive edge against other firms and newer market entrants.

B. Changes in consumer preferences: Shifts in investor behavior and preferences, such as a move towards sustainable and responsible investing, could impact Ares’ product offerings and business model.

C. Strategic partnerships and alliances: Ares Management often enters into strategic partnerships and alliances. While these can provide significant benefits, they also carry risks related to dependency and control over the business.

A. Data breaches and cybersecurity threats: As a data-centric company, Ares Management is continuously at risk of cybersecurity threats and data breaches, which could undermine stakeholder trust and lead to substantial legal and financial repercussions.

B. Negative media coverage: Negative press, whether justified or not, can have an immediate and lasting impact on the reputation of Ares Management, potentially affecting client trust and investor confidence.

C. Environmental and social responsibility concerns: As public focus on corporate responsibility grows, any perceived lapses in environmental or social issues could harm Ares’ reputation and even its operational viability.

A. Anti-trust and competition laws: In its global operations, Ares must navigate complex anti-trust and competition laws, non-compliance with which could result in significant penalties and disrupt business operations.

B. Employment-related litigations: As an employer in a highly competitive industry, Ares is exposed to risks of employment-related litigations including, but not limited to, disputes over contracts, labor rights, and workplace conditions.

C. Intellectual property infringements: While not a typical concern for investment firms, the management of proprietary systems and methodologies can occasionally lead to disputes related to intellectual property rights.

A. Diversification of investments: Ares actively diversifies its investment portfolio across different sectors, geographies, and asset classes to spread risk and capitalize on varied market conditions.

B. Robust cybersecurity measures: Ares invests heavily in advanced cybersecurity protocols and systems to protect against unauthorized access and mitigate the risk of data breaches.

C. Regular compliance audits: To ensure adherence to various regulatory requirements, Ares conducts regular compliance audits. These audits help in early identification of potential compliance issues and mitigation of legal risks.

D. Contingency planning for supply chain disruptions: Although not greatly affected by traditional supply chain issues, Ares develops contingency strategies to handle disruptions in financial services and technological infrastructure.